Utah Admin. Code R590-166-5 - Security Deposit, Surety Bond, or Irrevocable Letter of Credit
(1) A home
protection company that maintains a security deposit, a surety bond, or an
irrevocable letter of credit shall comply with this subsection.
(a)
(i) A
security deposit shall be in an amount not less than $10,000 for each 500 home
protection service contracts in force in this state, but not to exceed
$100,000.
(ii) A security deposit
must be made in a federally insured financial institution under a tri-party
agreement that names the commissioner as a party.
(iii) If a home protection company fails to
perform its obligations to its contract holders, the commissioner may make
equitable distributions to contract holders from funds on deposit.
(b)
(i) A surety bond shall be in favor of the
commissioner in the amount of $50,000.
(ii) When the number of home protection
service contracts issued by a home protection company in force in this state
exceeds 2,500, the amount of a surety bond shall be increased to
$100,000.
(iii) A surety bond shall
be issued by an insurer authorized to transact surety business in this
state.
(iv) A surety bond may not
be cancelled or subject to cancellation unless at least 30 days advance written
notice is filed with the commissioner and evidence of other security is
provided.
(c)
(i) An irrevocable letter of credit shall be
in favor of the commissioner in the amount of $50,000.
(ii) When the number of home protection
service contracts issued by a home protection company in force in this state
exceeds 2,500, the amount of an irrevocable letter of credit shall be increased
to $100,000.
(iii) An irrevocable
letter of credit shall be issued from a bank approved by the commissioner and
in a form acceptable to the commissioner.
(iv) An irrevocable letter of credit may not
be cancelled or subject to cancellation unless at least 30 days advance written
notice is filed with the commissioner and evidence of other security is
provided.
(d)
(i) Proceeds from a security deposit, a
surety bond, or an irrevocable letter of credit under this rule may be
administered by the commissioner for the benefit of a person sustaining
actionable injury due to the insolvency or impairment of a home protection
company.
(ii) At the option of the
commissioner, the commissioner may seek to arrange the assumption of an
insolvent home protection company's obligations and business on behalf of a
solvent company, and apply the insolvent home protection company's deposits or
proceeds of a surety bond or an irrevocable letter of credit with the assuming
company.
(2)
(a) A security deposit, a surety bond, or an
irrevocable letter of credit shall be maintained unimpaired while a home
protection company continues to do business in this state.
(b) When a home protection company ceases to
do business in this state and furnishes the commissioner proof that it has
discharged or otherwise adequately provided for each of its obligations to its
contract holders, the commissioner shall authorize release of a security
deposit, a surety bond, or an irrevocable letter of credit on file at that
time.
Notes
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